How Important Is FX Trading Psychology?

In fx trading, maintaining a psychological balance is critically important to your success. If you begin to take your fx trading personally (i. e., “That was my fault.”) or become obsessed with the amount of money that you’re making (or losing) – instead of concentrating on increasing the average profitability of your fx trading – you run the risk of getting side-tracked by issues that have no merit vis-a-vis your trading performance. Then, it’s only a matter of time before you start really losing money! So, stay balanced; stay objective; and, stay on plan. If something really bad happens in your life, stop fx trading. The market will be waiting for you when you’re feeling better. There’s no sense in forcing things that are not meant to be. A professional trader goes with the flow.
How you approach trading depends upon your culture, background and personality. There’s no single “good style”. According to research conducted by the American trading psychologist, Dr. Tharp, there are at least 4 kinds of personalities that do well in trading.

FX Trading Psychology Discussed

An expert trader is perfectly neutral. He/she doesn’t really care if prices are going up or down. Unlike many other markets, in forex, you can sell or buy freely and at the same price levels. In other words, an expert has no psychological baggage weighing on any trading decisions. This allows him or her to fully concentrate on the next trade. If you’re feeling blue (or super happy), don’t trade. Take a break. Wait until you have regained a state of pure analytical equilibrium. This is a learned trait. Only through experience can you perfect this state of mind. Newbies can use a “demo account” to jumpstart this process. They’re free and you don’t risk any of your own money.

FX Trading Personality Types

Fx trading attracts a certain kind of person. According to research conducted by Dr. Van Tharp (an American psychologist that specialises in identifying what constitutes a successful trader), 4 basic personality categories dominate trading, but only constitute approximately 12% of the total population. The first category is either an “introvert” or an “extrovert”, with extroverts having a better trading record. The second category is a “sensitive” or “intuitive” person, with intuitives showing more trading acumen. The third category is a “thinking” or “feeling” person, with almost all top traders (in this grouping) being “thinking” types. The last category is a “judging” or “perceiving” person, with “judgers” dominating traders in this group. If this subject interests you, visit his institute at “iitm.com”.

Do You Have The Right Approach For FX Trading?

There’s no 1 “correct” approach to trading. There are, however, certain characteristics that most expert traders share. For instance, expert traders do not take their trading personally. If they experience a loss, it’s just another event to pay more attention to – not the end of the world. Experts are also very methodical. They tend to get up early, read the news, look at their charts and, then, decide if they are going to trade or not. And, they will do this day after day unless they’re on vacation. Experts don’t change their strategies. If they have a winning strategy, they stick to it. Yet, they are constantly searching for a better strategy. To them, it’s not research. It’s fun.